Economic week ahead: SA current account deficit

The rand may come under pressure this week if, as expected, South African Reserve Bank data shows that South Africa’s current account deficit widened in the second quarter.

Elsewhere in the world, economists and investors will be on the lookout for US retail sales, a slew of data from the UK and China’s latest inflation snapshots. Here is your guide.

AfricaThe South African Reserve Bank will release its latest quarterly bulletin on Tuesday, including second quarter current account data.
Economists widely expect South Africa’s current account deficit to have widened from the R161-billion gap reported for the first quarter, likely swelling to 5.2% of gross domestic product (GDP) from 4.5% previously.

Later on Tuesday, the Bureau for Economic Research (BER) will release its third quarter business confidence index. The BER’s confidence gauge remained unchanged at 41-points in the second quarter, implying that nearly 60% of respondents continued to be unhappy with prevailing business conditions in the continent’s number two economy. Third quarter results are unlikely to show any meaningful improvement.

As the week rolls on, attention will turn to the South African Chamber of Commerce and Industry’s August trade conditions survey results on Wednesday and July mining and manufacturing updates from Statistics South Africa on Thursday.

Elsewhere on the continent, inflation reports dominate this week’s data docket. Egypt will report last month’s consumer price index (CPI) readings on Wednesday. Ghana’s August CPI will follow on Thursday. Consumer inflation snapshots are also expected from Tanzania and Senegal sometime this week and from Angola late this week or early next.

United StatesOn Tuesday, the National Federation of Independent Businesses will release their August small business optimism index and the US Labor Department will report the July results from their job openings and labor turnover survey, a favoured economic indicator of US Federal Reserve chief Janet Yellen.

Mid-week, commerce department data may show that wholesale inventories rose 0.5% in July following June’s 0.3% monthly gain. Investors look at the ratio of inventories to sales as an indicator of production trends over the coming months.

On Thursday, America’s weekly jobless claims report will probably show that first time filings for unemployment benefits fell slightly in the week ended September 6 to 300 000 from 302 000 in the previous week. Initial claims have been steady at low levels and continuing claims – which are reported with a one-week lag – have been showing signs of improvement, bolstering the argument that the US’s labour market, despite some fits and starts, is largely on the mend.

Closing out the week on Friday, last month’s retail sales figures are likely to show that back to school shopping helped boost retail sales in the world’s largest economy to 0.6% month-on-month growth in August, an improvement on July’s flat reading. Consumer spending accounts for around 70% of the US economy so this report is always closely scrutinised.

Also on Friday, preliminary results from the Reuter’s/University of Michigan’s monthly consumer survey are likely to show that their consumer sentiment index rose to 83.4 this month from 82.5 in August.

On Tuesday, attention will turn to the UK’s latest industrial production, manufacturing and trade reports. Industrial output likely slowed to 0.2% monthly growth in July from 0.3% in June. Manufacturing production probably expanded by 0.3% over the same period. The deficit on trade in goods may have narrowed to £9.1-billion in July from £9.4-billion in June.

On Wednesday, the Royal Institute of Chartered Surveyors house price balance – an indicator of the expected monthly change in house prices in the UK – will take centre stage. Consensus is that the price barometer will ease further in August after falling to its weakest level since February in July, providing additional evidence that London’s property boom appears to be fizzling.

On Friday, policymakers at Russia’s central bank are likely to leave their benchmark interest rate unchanged at 8%. Eurozone finance ministers will meet in Milan for talks on the region’s economic recovery and progress toward a banking union. Eurostat will release the bloc’s July industrial production figures and the UK will report July’s construction output figures.

In the background to this week’s data releases and policy meetings, markets will be keeping an eye on developments related to Scotland’s independence referendum – scheduled for September 18 – and to the still volatile situation in Ukraine.

AsiaAsia’s economic week began on Monday with news that China’s trade surplus climbed to a record $49.8-billion in August. Exports rose 9.4% from a year earlier as imports unexpectedly declined 2.4% over the same period.

Looking ahead, on Wednesday, the Bank of Japan will release August’s corporate goods price index and Japan’s cabinet office will release July machinery orders. Economists surveyed by Market News International expect the index to have risen 4.1% from a year earlier, the 17th consecutive year-on-year rise for the index. Private sector core machinery orders likely rose 4.1% on a monthly basis, down from 8.8% in June.

On Thursday, China will release last month’s consumer and producer inflation figures. Consumer inflation remained below its government’s goal in July and may have slowed further in August. Consensus is that China’s CPI rose 2.2% last month from a year earlier. Prices at the factory gate likely fell 1.1% from a year earlier in August after falling 0.9% from a year earlier in July.

Closing out the week, economists and investors will be on the lookout for industrial production figures from India and Japan and a rates decision from the Bank of Korea. South Korea’s central bank is widely expected to leave the country’s base rate unchanged at 2.25%.

Matt Quigley

Matt Quigley writes the weekly economic preview for the Mail & Guardian.
His blog on the South African economy can be found at www.thoughtleader.co.za/mattquigley
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